The UCL Practitioner

Supreme Court puts two UCL cases on May argument calendar: Rose v. Bank of America and Zhang v. Superior Court

Last week, the Supreme Court released its May oral argument calendar.  Two UCL cases will be heard.

On Tuesday, May 7, 2013 at 9:00 a.m., the Court will hear Rose v. Bank of America, no. S199074.  Justice Louis R. Mauro of the Third Appellate District will sit in place of Justice Chin, who is recused.  Links to the briefs in this case are available here. 

Then, on Wednesday, May 8, 2013 at 1:30 p.m., the Court will hear Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542.  Review was granted in Zhang in February 2010 and the briefing was completed in August 2010.  It is one of the oldest civil cases on the Court's docket.   

The issues raised in these cases are somewhat related.  The usual rule is that a statutory violation can lead to UCL liability regardless of whether the underlying, "borrowed" statute carries a private right of action. 

In Zhang, the Court of Appeal considered whether Moradi-Shalal, in which the Supreme Court held that the legislature did not intend to create a private right of action for violations of the Unfair Insurance Practices Act, also barred UCL "unlawful" prong claims for violations of the Act. An earlier case said it did, but in Zhang the Court of Appeal held that if the defendant's conduct not only violates the Act but is also otherwise unlawful, it can be pursued under the UCL.  Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009). 

Rose involved the Truth in Savings Act (12 U.S.C. § 4301 et seq.), a federal statute that used to carry a private right of action, but Congress allowed it to sunset.  The Court of Appeal reasoned that permitting a UCL "unlawful" prong claim would contravene Congress's intent to preclude the statute's private enforcement.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011).  Rose, unlike Zhang, has federal preemption implications. 

Both arguments will take place in San Francisco.  I hope to be able to attend at least one of them.

Amicus briefs in pending Supreme Court UCL case: Rose v. Bank of America

The merits briefing in Rose v. Bank of America, no. S199074, was completed in August.  After that, amicus curiae briefs were filed by a number of organizations: 

• Amicus Curiae Brief of the Center for Biological Diversity (filed 09/20/12)
• Amicus Curiae Brief of the California Bankers Association and the American Bankers Association (filed 09/27/12)
• Amicus Curiae Brief of the California Chamber of Commerce and the Chamber of Commerce of the United States (filed 09/27/12)
• Amicus Curiae Brief of Consumer Attorneys of California and the National Employment Law Center (filed 09/27/12)
• Amicus Curiae Brief of the Civil Justice Association of California (filed 09/27/12)
• Amicus Curiae Brief of the City Attorneys of San Francisco and Los Angeles (filed 10/16/12)

All of the above links are courtesy of plaintiffs' counsel, Henry Rossbacher, whose website has a case page devoted to the proceeding. The merits briefs are available there, or at these links:

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

New UCL opinion teaches pleading lesson: Hutton v. Fidelity National Title Co.

In Hutton v. Fidelity National Title Co., ___ Cal.App.4th ___ (Jan. 31, 2012), the Court of Appeal (Fifth Appellate District) affirmed summary judgment in a UCL case predicated on the defendant's alleged violation of a Government Code provision capping notary fees. 

After holding that the defendant had not violated that provision, thereby eliminating the UCL "unlawful" prong claim, the Court of Appeal refused to consider whether the plaintiff could proceed under the UCL's "unfair" or "frauduent" prongs because those prongs had not been adequately pleaded in the complaint:

In arguing that defendant did not address certain other potential causes of action, plaintiff’s appeal emphasizes that the UCL has three separate grounds of liability.  That is a correct statement of the law.  (See Bus. & Prof. Code, § 17200.)  “Since section 17200 is in the disjunctive, it establishes three separate types of unfair competition.  The statute prohibits practices that are either ‘unfair,’ or ‘unlawful,’ or ‘fraudulent.’  [Citation.]”  (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1496.)  Plaintiff argues that it stated a cause of action for potential unfair or fraudulent practices ....  Whatever we may think about the viability of such theories, the problem for plaintiff at this stage is that no such claim or cause of action was ever alleged.

In an effort to persuade us that these theories were somehow pled, plaintiff notes that the first cause of action included a statement that defendant’s conduct was “unlawful, unfair or fraudulent.”  But that was a bare conclusion, not the factual basis of a cause of action.  Moreover, we cannot ignore that the next sentence of the complaint made it unmistakably clear that the first cause of action was based solely on “unlawful” conduct.  It stated, as we previously noted above, as follows:  “Namely, [Defendant] overcharged Plaintiff … by assessing and collecting set Notary Fees in each Real Estate Transaction irrespective of the number of signatures actually notarized.  Plaintiff … [was] charged more than California law allowed, and thus lost money due to [Defendant’s] unlawful business practices.”  (Italics added.)  ....  Plainly then, the actionable wrongdoing for which relief was sought in the complaint was not a failure to disclose or itemize, nor a notary’s unauthorized practice of law, but that of overcharging plaintiff by exceeding the amount permitted under section 8211.

....

What we said at the outset of our discussion bears repeating here:  For purposes of a summary judgment motion, the pleadings set the boundaries of the issues to be resolved.  (Conroy, supra, 45 Cal.4th at p. 1250.)  Defendant, therefore, met its burden as the moving party when it negated the sole basis of plaintiff’s claims—namely, the alleged excessive notary fee under section 8211.  It was not incumbent on defendant to refute liability on some theoretical possibilities not included in the pleadings.  (Conroy, supra, at p. 1254; County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th at p. 332.)  Each of the suggested other grounds for liability argued by plaintiff were simply theoretical possibilities that were not included in the pleadings.  Finally, plaintiff cannot use his opposition papers as a substitute for an amended pleading, and his failure to seek an amendment below forfeits the issue.  (Conroy, supra, at p. 1254; County of Santa Clara v. Atlantic Richfield Co., supra, at pp. 333; Lackner v. North, supra, 135 Cal.App.4th at pp. 1201-1202, fn. 5.)

Slip op. at 15-17 (italics in original; bold added).

This case illustrates why the better way to plead a UCL claim in most cases will be to assert each prong as a separate, independent cause of action.  At a minimum, each prong should be pleaded in a separate paragraph or subparagraph specifically tailored to the elements of that prong.  The process of drafting separate allegations for each independent prong will force you to focus in on precisely how the defendant's conduct ran afoul of each prong. 

Interesting unpublished UCL public prosecutor opinion: People ex rel. Herrera v. Stender

On December 4, 2012, the Court of Appeal (First Appellate District, Division Two) handed down an interesting, but unpublished, UCL opinion.  People ex rel. Herrera v. Stender, 2012 WL 6016722, No. A131625 (Dec. 4, 2012). 

The San Francisco City Attorney sought to invoke the UCL in an attempt to shut down an immigration law practice allegedly headed up by an attorney who had resigned from the Bar with disciplinary charges pending. The opinion holds that the Rules of Professional Conduct can form the predicate of a UCL "unlawful" prong claim.  Slip op. at 17-18.  It also addresses the economic abstention doctrine (id. at 29-30) and the scope of injunctive relief available under the UCL.

UPDATE:  On January 3, 2013, the opinion was certified for publication.  Here is a link to the docket.

UCL "unlawful" prong opinion: Medrazo v. Honda of North Hollywood

This UCL opinion published in April got lost in the Brinker blizzard, but it is important and warrants  a belated post.  

In Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (Mar. 27, 2012; pub. ord. Apr. 16, 2012), the Court of Appeal (Second Appellate District, Division Four) addressed a UCL "unlawful" prong claim that went to trial on behalf of a certified class of motorcycle buyers.  Previously, in 2008, the Court of Appeal had reversed the trial court's order denying class certification.   Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008) (discussed in this blog post). In its 2012 opinion, the Court of Appeal reversed the trial court's order granting the defendant's motion for judgment at the conclusion of the plaintiff's case-in-chief (essentally, a motion for nonsuit). 

First, the opinion addresses the famous footnote of Tobacco II, where the Supreme Court explained that while reliance is an element of UCL standing in "fraudulent" prong cases, "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application."   In re Tobacco II Cases, 46 Cal.4th 298, 325 n.17 (2009). 

I have always thought the concept of reliance would be irrelevant in most "unlawful" prong cases, and the Court of Appeal confirmed this in Medrazo: 

[T]he Supreme Court ... explained [in Tobacco II] that an actual reliance requirement does not apply to UCL actions that are not based upon a fraud theory. (Id. at p. 325, fn. 17). In those actions, the plaintiff must simply show that the alleged violation caused or resulted in the loss of money or property.

Medrazo, 205 Cal.App.4th at12 (emphasis added).

The relevant question, for standing purposes in an "unlawful" prong case, is going to be whether the defendant's statutory violation caused the plaintiff to lose money.  In Medrazo, the defendant violated a Vehicle Code provision requiring that a hanger tag disclosing dealer-added charges be attached to all motorcycles offered for sale.  Id. at 4.  If the hanger tag is not attached, or if the dealer-added charges are not disclosed on the tag, the dealer may not collect the charges.  See id.  The plaintiff class lost money as a result of the defendant's violation because the class members paid such charges even though the defendant had not attached the required hanger tags.  Id. at 13-14.  It did not matter whether the class members had "relied" on the missing hanger tags, nor was proof required that they would or would not have bought the motorcycles if the hanger tags had been attached and read.  See id.  It was sufficient that the defendant had violated the law, that the plaintiffs had purchased the products, and that they paid the unlawfuly-imposed charges.  See id.

Put another way, the violation was not the dealer's failure to disclose the added charges, but rather its collection of those charges in violation of the statute. 

 The second important holding relates to the measure of restitution to be awarded at trial.  Medrazo is really the only helpful opinion on this issue since Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006).  While Colgan was a "fraudulent" prong case, Medrazo addresses the measure of restitution in the context of the "unlawful" prong.

Medrazo held that the proper measure of restitution was the full amount of the unlawfully-imposed charges:

If, on retrial, the court determines that [the defendant's] sale of motorcycles without hanger tags (or without tags that disclosed dealer-added charges) violated the UCL, class members will be entitled to restitution of any money “which may have been acquired [by defendant] by means of such unfair competition” (Bus. & Prof.Code, § 17203)—i.e., the dealer-added charges that were not disclosed on hanger tags. 

205 Cal.App.4th at 13-14 (footnote omitted) (emphasis added).  There was no question about the value of the motorcycles or whether the defendant could have sold them for the same price if the dealer-added charges had been properly disclosed.  No, the defendant will be required on remand to refund the full amount of the unlawfully-collected charges, period. 

In short, Medrazo is a very significant opinion that should be widely cited in other "unlawful" prong cases.  Here is my publication request filed in April on behalf of CAOC. Several other publication requests were also filed. 

New Ninth Circuit UCL and FAL opinion: Davis v. HSBC Bank Nevada, N.A.

In Davis v. HSBC Bank Nevada, N.A., ___ F.3d ___ (9th Cir. Aug. 31, 2012), the Ninth Circuit affirmed dismissal of UCL and FAL claims at the pleading stage:

Turning to the claims in the FAC, Davis first alleges that Best Buy’s advertising was misleading because it failed to disclose the existence of an annual fee. We agree with the district court that no reasonable consumer would have been deceived by these advertisements into thinking that no annual fee would be imposed.

Slip op. at 10377. 

The opinion also addresses and applies the Cel-Tech "safe harbor."  Id. at 10382-88.  The last sections cover the UCL's "unlawful" prong (here, the "unlawful" prong claim was predicated, interestingly, on a federal regulation requiring national banks to comply with section 5 of the FTC Act) and the "unfair" prong (here, the court noted the three-way split but found the complaint stated no claim under any formulation).  Id. at 10389-94. 

Reply brief on the merits filed in Rose v. Bank of America

The reply brief on the merits was filed on August 21, 2012 in in Rose v. Bank of America, no. S199074.  The merits briefing is now complete.

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

Amicus briefs, if any, will be due 30 days after the reply was filed (or by approximately September 20, 2012).  See Rule of Court 8.520(f). 

Answer brief on the merits filed in Rose v. Bank of America

Many thanks to the blog reader who forwarded the answer brief on the merits filed last week in Rose v. Bank of America, no. S199074.

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)

Supreme Court UCL preemption opinion: Parks v. MBNA America Bank, N.A.

In Parks v. MBNA America Bank, N.A., ___ Cal.4th ___ (Jun. 21, 2012), the Supreme Court held that the National Bank Act preempted a UCL "unlawful" prong claim predicated on violation of Civil Code section 1748.9, "a California law requiring that certain disclosures accompany preprinted checks that a credit card issuer provides to its cardholders for use as credit."  Slip op. at 1. 

The opinion says nothing substantive about the UCL in particular; its focus is on section 1748.9 and the provisions of the National Bank Act.

Opening brief on the merits filed in Rose v. Bank of America

The opening brief on the merits was filed last Tuesday in Rose v. Bank of America, no. S199074.

• Opening Brief on the Merits (filed 05-15-12)

The review petition, answer and reply are available at this post.  This is the statement of the issue on review in Rose:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

New UCL "unlawful" prong opinion: Elder v. Pacific Bell Tel. Co.

In Elder v. Pacific Bell Tel. Co., ___ Cal.App.4th ___ (Apr. 30, 2012), the Court of Appeal (First Appellate District, Division Three) reversed the trial court's judgment following an order sustaining the defendant's demurrer to the UCL and other claims without leave to amend.

The action was predicated on violations of certain Public Utilities Code provisions.  After rejecting the defendants' exclusive and primary jurisdiction arguments, the Court of Appeal held that the complaint stated a cause of action for violation of the UCL's "unlawful" prong.  Slip op. at 14-15. 

The Court thus had no occasion to consider the other prongs:

“Ordinarily, a general demurrer does not lie as to a portion of a cause of action and if any part of a cause of action is properly pleaded, the demurrer will be overruled.”  (Fire Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.)  Consequently, in light of our determination that a UCL cause of action has been stated based on an unlawful business practice for a violation of [Public Utilities Code] section 2890, we need not, and do not address defendants’ other challenges to the UCL cause of action.

Id. at 15 n.14.

Review petition in Rose v. Bank of America

Here are the review petition and other documents from Rose v. Bank of America, no. S199074, in which the Supreme Court granted review on March 14, 2012:

• Petition for review (filed 12/30/11)
• Answer to petition for review (filed 01/20/12)
• Reply in support of petition for review (filed 01/31/12)
• Amicus letter of AG's office in support of petition for review (dated 01/31/12)

I have not seen the answer to the petition for review.  If you have a copy, please forward it and I will add it to the list above.  [UPDATE:  Many thanks to the blog reader who provided a copy of the answer to the petition for review. ]

The AG's letter is interesting.  According to the letter (at p. 4), the Court of Appeal in Rose held that a UCL "unlawful" prong claim may not be "predicated on violations of federal laws where Congress did not provide a private right of action."  I did not read the Rose opinion quite so broadly, but if this is what it held, that is certainly inconsistent with California Supreme Court precedents.  The letter makes a series of excellent arguments in support of review. 

Here is the docket's statement of the issue on review in Rose:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

Statement of issue on review in Rose v. Bank of America

The Supreme Court's docket in Rose v. Bank of America, no. S199074, has been updated to include a statement of the issue on review:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

This is rather a narrow statement, and tells us little about the extent to which the Court may elaborate on the scope of the UCL's "unlawful" prong, as the Court of Appeal did in its now-uncitable opinion. 

California Supreme Court grants review in UCL "safe harbor" case: Rose v. Bank of America

Yesterday, the Supreme Court granted review in Rose v. Bank of America, no. S199074.  In that case, the Court of Appeal held that a UCL "unlawful" prong claim could not be predicated on alleged violations of the federal Truth in Savings Act (TISA), 12 U.S.C. § 4301 et seq.  Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011). 

The opinion's discussion of the UCL's "unlawful" prong and the scope of the Cel-Tech "safe harbor" was quite interesting.  My original blog post on Rose is here. 

The Supreme Court docket has not yet been updated with a description of the issue(s) on review. 

New UCL "safe harbor" decision: Rose v. Bank of America, N.A.

In Rose v. Bank of America, N.A., ___ Cal.App.4th ___ (Nov. 21, 2011), the Court of Appeal (Second Appellate District, Division Two) held that a UCL "unlawful" prong claim could not be predicated on alleged violations of the federal Truth in Savings Act (TISA), 12 U.S.C. § 4301 et seq.

The Court reasoned that Congress evinced a clear intent not to allow private enforcement of that Act by repealing the statute creating a private right of action:

We do not believe that California consumers can seek injunctive relief and restitution against a bank for “unlawful” conduct when Congress has clearly rejected a private right to enforce TISA.  Congress indicated its intent in 1996, when it enacted a sunset clause that expressly repealed the statute allowing individuals to enforce TISA.  It reconfirmed that intent when, in 2001, it rebuffed legislation to reinstate civil liability suits against noncompliant banks.  When the legislative history shows that legislators expressly considered and rejected specific legislation, we need not speculate about legislative intent.  (City of Santa Cruz v. Municipal Court (1989) 49 Cal.3d 74, 88-89.)  Only federal authorities have standing to enforce bank compliance with TISA.  Allowing private plaintiffs to recover on a UCL claim based solely on TISA violations would constitute an “end run” around the limits on enforcement set by Congress.  (Gunther v. Capital One, N.A., supra, 703 F.Supp.2d at pp. 270-271.)

Slip op. at 9-10.   The opinion's discussion of the limits on UCL "unlawful" prong claims is quite interesting.  Id. at 5-8.  The opinion also addresses the UCL's "unfair" prong, holding that the complaint failed to state a claim under any of the three formulations that have developed in the case law.  Id. at 10-11.

More on Sullivan v. Oracle Corp.

The Supreme Court's discussion of the UCL claim in Sullivan v. Oracle Corp., ___ Cal.4th ___ (Jun. 30, 2011), is quite interesting.  It does nothing, however, to narrow current thinking on the scope of the UCL's extraterritorial reach. 

The plaintiffs, who are non-California residents, invoked the UCL's "unlawful" prong claim against their California-based employer, Oracle, in an attempt to revive Fair Labor Standard Act ("FLSA") claims that otherwise would have been time-barred.  Slip op. at 19 & n.8.  Their complaint alleged that Oracle violated the FLSA by failing to appropriately compensate them for overtime work they performed outside California.  This, in turn, violated the UCL's "unlawful" prong (which carries a four-year statute of limitations).   Id. at 19. 

To decide whether the UCL could be invoked as plaintiffs proposed, the Supreme Court needed to consider whether any of the conduct that violated the FLSA occurred in California.  Id. at 20-21.  The defendant's motion for summary judgment on this issue was based on stipulated facts.  Id. at 3.  The only stipulated fact relevant to the analysis was Oracle's adoption, in California, of a policy erroneously classifying the plaintiffs as exempt from the overtime laws.  Id. at 21.  "But for an employer to adopt an erroneous classification policy is not unlawful in the abstract.  [Citation.]  What is unlawful, and what creates liability under the FLSA, is the failure to pay overtime when due."  Id.

The stipulated facts did not address whether the plaintiffs' wages were paid by Oracle in California.  If they were, "the UCL might conceivably apply to plaintiffs' claims": 

In contrast to the abstract classification decision, the failure to pay legally required overtime compensation certainly is an unlawful business act or practice for purposes of the UCL.  (Bus. & Prof. Code, § 17200; see Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully withheld wages].)

Id. at 22.  The Supreme Court declined to go any further, leaving it to the federal court to decide whether the parties could augment the statement of stipulated facts to address the question of where the wages were paid (or underpaid).  Id. 

In other words, the Sullivan decision does not really impact existing jurisprudence on the UCL's operation outside the borders of California.  In fact, the Court favorably cited two decisions approving nationwide class actions for UCL violations, explaining that extraterritorial operation was proper in those cases because "the unlawful conduct that formed the basis of the out-of-state plaintiffs' claims (i.e., fraudulent misrepresentations made to induce consumer transactions) ... occurred in California."  Id. at 21 n.10 (citing Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224 (2001); Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605 (1987)). 

The decision does not even cite Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214 (1999), which has been the leading case on extraterritorial reach up to this point.  In Norwest, the Court of Appeal held that non-Californians could bring UCL claims if the conduct constituting the violation occurred in California.  Sullivan implicitly held exactly the same thing.  (See this blog post for a lengthier discussion of Norwest.)

Accordingly, Sullivan has changed nothing in the UCL playbook, despite the defendant's technical win on the point as framed. 

Kwikset and Tobacco II footnotes

I'm sure everyone is well aware of famous footnote 17 in Tobacco II:

We emphasize that our discussion of causation in this case is limited to such cases where, as here, a UCL action is based on a fraud theory involving false advertising and misrepresentations to consumers. The UCL defines "unfair competition" as "includ[ing] any unlawful, unfair or fraudulent business act or practice . . . ." (§ 17200.) There are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application.

In re Tobacco II Cases, 46 Cal.4th 298, 325 n.17 (2009) (emphasis added).  The example I like to use of a UCL case in which "the concept of reliance ... has no application" is an "unlawful" prong case predicated on a Labor Code violation.  Either the defendant calculated the overtime rate correctly or it did not.  The class members' reliance, or lack thereof, is irrelevant to the named plaintiff's standing (and to the violation). 

Kwikset has a similar footnote:

While plaintiffs also allege unlawful conduct, in that Kwikset violated Business and Professions Code sections 17500 and 17533.7 and Civil Code section 1770, subdivision (a)(4), these statutory provisions simply codify prohibitions against certain specific types of misrepresentations. The theory of the case is that Kwikset engaged in misrepresentations and deceived consumers. Thus, our remarks in In re Tobacco II Cases, supra, 46 Cal.4th 298, concerning the cause requirement in deception cases, are apposite. (See Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1363 [“[T]he reasoning of Tobacco II [concerning the cause requirement] applies equally to the ‘unlawful’ prong of the UCL when, as here, the predicate unlawfulness is misrepresentation and deception.”]; Hale v. Sharp Healthcare, supra, 183 Cal.App.4th at p. 1385 [In re Tobacco II Cases’ discussion of causation applies equally to unlawful UCL claims based on misrepresentation].) As in In re Tobacco II Cases, at page 325, footnote 17, we need express no views concerning the proper construction of the cause requirement in other types of cases.

Kwikset Corp. v. Superior Court (Benson), 51 Cal.4th 310, 2011 WL 240278, *8 n.9 (2011) (emphasis added).  The opinion's approval of Durell and Hale on this point is interesting, but I think my Labor Code example remains apt. 

Ninth Circuit "unlawful" prong decision: Shroyer v. New Cingular Wireless Services

I have not previously reported on Shroyer v. New Cingular Wireless Services, 606 F.3d 658 (9th Cir. 2010), issued in May and amended in September, in which the Ninth Circuit addressed the UCL's "unlawful" prong:

In his complaint, Shroyer alleged that New Cingular violated the common law of unfair competition and breached his contract. These practices alone do not amount to a violation of the “unlawful” prong of § 17200; Shroyer must also allege that New Cingular engaged in a business practice “forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.” Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-39 (Cal. Ct. App. 1994). In other words, a common law violation such as breach of contract is insufficient. See Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 450-54 (Cal. Ct. App. 1988) (finding a § 17200 violation only after finding three violations of the California Food and Agriculture Code); see also Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 319 F. Supp. 2d 1059, 1074-75 (C.D. Cal. 2003) (holding that a violation of common law can support a § 17200 claim, provided that the conduct is also unlawful, unfair, or fraudulent). Because Shroyer does not go beyond alleging a violation of common law, he fails to state a claim under the unlawful prong of § 17200.

Slip op. at 14421 (emphasis added). Given the emphasized language that the panel quoted from the Saunders decision (which finds support in many other California appellate decisions), I'm not sure how the panel could then conclude that a common-law violation cannot support a UCL "unlawful" prong claim.  The other cases the panel cites provide scant support, and the case law in California is generally to the contrary.

New CLRA and UCL "unlawful" prong decision: Vitug v. Alameda Point Storage, Inc.

In Vitug v. Alameda Point Storage, Inc., ___ Cal.App.4th ___ (Aug. 10, 2010), the Court of Appeal affirmed a judgment entered following a demurrer to CLRA and UCL "unlawful" prong claims predicated on alleged violations of the California Self-Service Storage Facility Act (Bus. & Prof. Code §§ 21700 et seq.).

Supreme Court to hand down two opinions of interest today: Clark v. Superior Court and Lu v. Hawaiian Gardens

According to Friday's notice of forthcoming filings, two opinions of interest will be handed down this morning at 10:00 a.m.:

• Clark v. Superior Court (Nat'l Western Life Ins.), ___ Cal.4th ___ (Aug. 10, 2010) (no. S174229)
  
• Lu v. Hawaiian Gardens Casino, Inc., ___ Cal.4th ___ (Aug. 10, 2010) (no. S171442)

Clark involves whether the enhanced remedies of Civil Code section 3345 (applicable in certain cases brought by senior citizens and disabled persons) are recoverable in a UCL "unlawful" prong case predicated on violation of that statute.  Here's my original post on the case. 

Lu involves whether Labor Code section 351 creates a private right of action.  The case also included a UCL "unlawful" prong cause of action, my original discussion of which is here. 

New UCL "unlawful" prong decision: Nelson v. Pearson Ford Co.

In Nelson v. Pearson Ford Co., ___ Cal.App.4th ___ (Jul. 15, 2010), the Court of Appeal (Fourth Appellate District, Division One) addressed a number of interesting UCL-related issues.  The most interesting one is the class representative's standing in an "unlawful" prong case.   Slip op. at 32-34.

The first 30+ pages of the opinion focus on whether the defendant auto dealer violated various provisions of the Automobile Sales Finance Act (Civ. Code §2981 et seq.) ("ASFA").  After concluding that it had, the Court of Appeal turned to the UCL and CLRA claims.  The first question was Prop. 64 standing:

Pearson Ford does not challenge the conclusion that its violations of the ASFA support Nelson's UCL claims; rather its appeal is limited to the trial court's finding that Nelson had standing to pursue claims under the UCL. Pearson Ford focuses its argument on whether Nelson suffered injury "as a result of" its unfair competition under the UCL. (Bus. & Prof. Code, § 17204.) Relying on Troyk [v. Farmers Group, Inc., 171 Cal.App.4th 1305 (2009)], Pearson Ford contends that Nelson needed to prove he would not have bought the car if he had known that the second contract: (1) charged him pre-consummation interest; (2) misstated the APR; and (3) failed to separately itemize the $250 insurance premium. We disagree.

The failure of Pearson Ford to comply with the ASFA caused Nelson to suffer an injury and lose money as to both classes because he paid pre-consummation interest (the backdating class), and paid sales tax and financing charges on the insurance premium (the insurance class). Unlike Troyk, these illegal charges violated the UCL and Pearson Ford improperly collected additional funds from Nelson. UCL causation exists because Nelson would not have paid pre-consummation interest, or sales tax and financing charges on the insurance premium had Pearson Ford complied with the ASFA. Because Nelson had standing to pursue claims under the UCL, we reject Pearson Ford's argument that the judgment in favor of both classes should be vacated to the extent it grants relief under the UCL.

Slip op. at 34 (emphasis added). 

This holding is consistent with the Tobacco II footnote explaining that "the concept of reliance" will have "no application" in many UCL cases.  In re Tobacco II Cases, 46 Cal.4th 298, 325 n.17 (2009).  In Nelson, the defendant violated the law, which meant that additional charges and incorrect interest calculations were incorporated into the plaintiff's sales contract.  This occurred wholly apart from any "reliance" by the plaintiff.  By contrast, "the lack of disclosure of proper charges, not illegal charges, violated the UCL in Troyk." Nelson, slip op. at 33.   

The Nelson opinion goes on to discuss UCL restitution (slip op. at 35-38) (worth reading); UCL rescission (slip op. at 39-40) (which it holds is not an available remedy); unclaimed residual funds under Code of Civil Procedure section 384 (slip op. at 40-42) (see this blog post for more on that topic); the CLRA (slip op. at 45-47); and 998 offers in the class action context (slip op. at 48-52). 

New UCL public prosecutor decision: People ex rel. City of Santa Monica v. Gabriel

The Court of Appeal's opinion in People ex rel. City of Santa Monica v. Gabriel, ___ Cal.App.4th ___ (Jul. 14, 2010) (Second Appellate District, Division One) has two holdings of note. 

First, sexual harassment of a residential tenant by her landlord constitutes a "business act or practice" remediable under the UCL.  Slip op. at 5-6.  Landlord-tenant sexual harassment violates several statutes and municipal ordinances, and the city attorney brought the case as a UCL "unlawful" prong claim.  See id. at 2.  (Of course, the city attorney need not worry about Prop. 64 standing or whether anyone "lost money or property" as a result of the defendant's conduct.  See Bus. & Prof. Code § 17204.) 

Second, attorneys' fees are not recoverable under the UCL, even if the "borrowed" law has a fee-shifting provision.  Slip op. at 7-10.  The Court of Appeal reached a similar conclusion last November in Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581 (2009), affirming denial of a prevailing defendant's attorneys' fees motion in an "unlawful" prong case in which the "borrowed" law would have permitted fee-shifting if the action had been brought directly under that law.  Id. at 599-601.  The Gabriel opinion does not mention Davis. 

See this blog post for a discussion of the attorneys' fees holding in Davis.

Review granted in Yabsley v. Cingular Wireless

On Thursday, November 19, 2009, the Supreme Court issued a "grant and hold" order in Yabsley v. Cingular Wireless, no. S716146, "pending consideration and disposition of a related issue in Loeffler v. Target Corp., S173972."  (Hyperlink added.)  Here is the statement of the issue:

Does article XIII, section 32 of the California Constitution or Revenue and Taxation Code section 6932 bar a consumer from filing a lawsuit against a retailer under the Unfair Competition Law (Bus. & Prof. Code sections 17200 et seq.) or the Consumers Legal Remedies Act (Civ. Code, section 1750 et seq.) alleging that the retailer charged sales tax on transactions that were not taxable?

This is the UCL "unlawful" prong case in which I thought the opinion contained several non-outcome-determinative errors.  That was the primary basis for my depublication request for CAOC, but it seems clear that review was granted because of the underlying tax law issue raised in the case, which is the same as the issue in Loeffler.  Either way, the opinion is no longer citable precedent.

For more on the case, including links to some of the briefs, see these blog posts. 

New UCL "unlawful" prong decision: Pineda v. Williams-Sonoma Stores, Inc.

In Pineda v. Williams-Sonoma Stores, Inc., ___ Cal.App.4th ___ (Oct. 8, 2009; pub. ord. Oct. 23, 2009), the plaintiff raised a UCL "unlawful" prong claim, but later "conceded" the defendant's demurrer based on lack of standing.  UCL standing therefore was not an issue on appeal. 

The remainder of the case was for alleged violation of Civil Code section 1747.08(a)(2), which prohibits merchants who accept credit cards from requesting and recording "personal identifying information" about the cardholder (in this case, her zip code) and invasion of privacy. The Court of Appeal (Fourth Appellate District, Division Two) affirmed the judgment following the trial court's order sustaining the defendant's demurrer to those claims.  

More material from Yabsley v. Cingular Wireless

A reader posted a comment asking whether I could put up additional material from Yabsley v. Cingular Wireless, no. S716146, in which a petition for review was filed on September 29, 2009.  Here's what I have: 

• Depublication Request of The Kick Law Firm (filed 09/09/09) (initial case event)
• Depublication Request of Consumer Attorneys of California (filed 09/14/09)
• Opposition of the California State Board of Equalization to both Depublication Requests (filed 09/18/09)
• Opposition of AT&T Mobility LLC fka Cingular Wireless LLC to CAOC's Depublication Request (filed 09/24/09)

See these two blog posts for more on Yabsley.  If anyone has copies of additional documents, such as the petition for review or the opposition filed by the Association of Southern California Defense Counsel, please forward.

Petition for review and depublication requests filed in Yabsley v. Cingular Wireless

A petition for review, along with more than one depublication request, has been filed in Yabsley v. Cingular Wireless, no. S716146.  Here is the depublication request I filed on behalf of CAOC on September 14, 2009.  It basically makes the same points as in my original blog post on the decision. 

Yabsley was handed down on August 19, 2009 and became final on or about September 18, 2009.  The petition for review was due ten days thereafter and was filed on September 29, 2009 (and deemed timely per Rule of Court 8.25(b)(3)). 

I thought about writing directly to the Court of Appeal and suggesting some (non-outcome-determinative) modifications to the opinion, but the last time I tried that, which was in the Crab Addison case, the panel refused to accept my letter for filing, evidently believing they had no authority to consider it. Therefore, the only other option was a depublication request (which I had no interest in filing in Crab Addison). 

I have, however, seen that approach work in the past.  For example, the Supreme Court accepted a post-opinion letter from a non-party in the Vasquez attorneys' fees case, which resulted in an important (but non-outcome-determinative) amendment to the opinion on the Court's own motion.   I've also seen the same thing in the Court of Appeal in the past.  I think the Crab Addison court could have accepted the letter based on Vasquez as a precedent.

Supreme Court discusses UCL "unlawful" prong: Munson v. Del Taco, Inc.

In Munson v. Del Taco, Inc., ___ Cal.4th ___ (Jun. 11, 2009), a case involving disability discrimination under the Unruh Civil Rights Act, the Supreme Court discussed the UCL's "unlawful" prong:

Gunther also noted that under its interpretation of section 51, subdivision (f), violations of the ADA that do not involve intentional discrimination might still find a remedy in California law through an action charging an unlawful business practice (Bus. & Prof. Code, §§ 17200, 17203). (Gunther, supra, 144 Cal.App.4th at p. 234.) Though true, that could not have been a purpose of adding subdivision (f) to section 51 of the Civil Code. Violations of federal as well as state and local law may serve as the predicate for an unlawful practice claim under Business and Professions Code section 17200. (See Quacchia v. DaimlerChrysler Corp. (2004) 122 Cal.App.4th 1442, 1450, fn. 5; Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838-839.) Assuming all other requirements for such an action were met, therefore, violations of the ADA’s accessibility mandate, whether involving intentional discrimination or not, would be remediable through Business and Professions Code sections 17200 and 17203. It did not take incorporation of the ADA mandate into the Unruh Civil Rights Act to achieve that result.

Slip op. at 18-19 (bold added). I believe this is the first time that the Supreme Court, rather than the Court of Appeal, has confirmed that a UCL "unlawful" prong claim may be predicated on violations of federal and local laws as well as state laws. This language is also useful for its confirmation that the UCL carries no "intent" element (or any other element of scienter). 

New UCL "unlawful" prong decision: Lu v. Hawaiian Gardens Casino, Inc.

In Lu v. Hawaiian Gardens Casino, Inc., ___ Cal.App.4th ___ (Jan. 22, 2009), the Court of Appeal (Second Appellate District, Division Three) held that claims for violation of certain Labor Code provisions could proceed under the UCL's "unlawful" prong, even though the provisions themselves carred no private right of action.  Slip op. at 11. 

New Court of Appeal opinion in Mervyn's on remand

Yesterday, the Court of Appeal (First Appellate District, Division Four) handed down its third opinion (and its second published one) in the case between Mervyn's and Californians for Disability Rights: Californians for Disability Rights v. Mervyn's, LLC, ___ Cal.App.4th ___ (Jul. 30, 2008). In it, the Court held that Mervyn's violated the UCL's "unlawful" prong by failing to comply with the federal Americans with Disabilities Act (42 U.S.C. §§ 12101 et seq.). Today's San Francisco Chronicle has an article on the opinion.

For our purposes, the opinion's discussion of the procedural history is most interesting:

While this case was pending on appeal, the voters of California amended the statute under which the case had been prosecuted. The voters’ enactment, popularly known as Proposition 64, was passed in the California General Election on November 2, 2004, and went into effect the next day. (Cal. Const., art. II, § 10, subd. (a).) At the time this case was tried, the UCL authorized any person acting for the general public to sue for relief from unfair competition. (Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 228 (Mervyn’s).) “Standing to bring such an action did not depend on a showing of injury or damage.” (Ibid.) Proposition 64 amended the UCL to limit private enforcement to those who have suffered injury in fact and have lost money or property as a result of such unfair competition. (Ibid.) Proposition 64 did not state whether this new limitation applies to pending cases. (Id. at p. 229.)

On December 6, 2004, Mervyn’s moved to dismiss this appeal upon the claim that Proposition 64’s change in standing requirements apply to pending cases. We denied the motion because new legislative enactments are presumed to operate prospectively, rather than retroactively, to avoid unfair impairment of existing rights and obligations. In July 2006, the California Supreme Court reversed our ruling, upon concluding that application of Proposition 64’s standing requirements to pending cases would not constitute a retroactive application of the law because the initiative measure did not change any existing rights or obligations. (Mervyn’s, supra, 39 Cal.4th at pp. 232-234.) While the measure “withdraws the standing of persons who have not been harmed to represent those who have,” it did not impair any rights because lack of standing is a jurisdictional challenge that can be raised at any time in a legal proceeding. (Id. at pp. 232-233.) The high court reversed our denial of Mervyn’s motion to dismiss the appeal and remanded the case to us “for further proceedings consistent” with its opinion. (Id. at p. 234.)

On remand to this court, CDR asked leave to move for substitution of plaintiff on appeal—it did not contend that it had standing to appeal in its own right as a party aggrieved by the judgment under Code of Civil Procedure section 902. We denied CDR’s request and granted Mervyn’s motion to dismiss the appeal for lack of standing by CDR. CDR petitioned for review in the Supreme Court. The Supreme Court granted review and transferred the case to us with directions to vacate our decision and to reconsider the cause in light of United Investors Life Ins. Co. v. Waddell & Reed, Inc. (2005) 125 Cal.App.4th 1300 (United Investors) and Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235 (Branick).

United Investors held that a plaintiff has standing to appeal dismissal of a UCL complaint following demurrer even if it has no authority to maintain its suit in superior court, because plaintiff “is sufficiently aggrieved by the dismissal of its complaint that it has standing to appeal under Code of Civil Procedure section 902.” (United Investors, supra, 125 Cal.App.4th at p. 1305.) Branick held that Proposition 64 does not forbid amendment of complaints in the trial court to substitute new plaintiffs for those who have lost standing under the new measure. (Branick, supra, 39 Cal.4th at pp. 241-242.) The “ordinary rules governing the amendment of complaints” apply. (Id. at p. 239.)

Upon reconsideration, we denied Mervyn’s motion to dismiss the appeal in a ruling we issued on April 17, 2007. We concluded that the two cases referenced by the high court, “when read in conjunction, lead to the following conclusion: CDR is a party aggrieved by entry of judgment against it and thus has standing to appeal the judgment even if CDR has no authority to maintain its suit in superior court (United Investors, supra, 125 Cal.App.4th at pp. 1304-1305); and, if CDR succeeds in its effort to reverse the judgment on appeal, it may seek leave in the superior court to amend its complaint to substitute a plaintiff who meets the Proposition 64 standing requirement.” (Branick, supra, 39 Cal.4th at pp. 240-244.) Mervyn’s petitioned for review in the Supreme Court, and the petition was denied on July 18, 2007.

The parties completed briefing on the merits of the appeal in January 2008, and the matter was argued and submitted for decision. We now turn to the trial court’s factual findings following the bench trial, and then proceed to discuss CDR’s claims raised on appeal.

Slip op. at 3-4. After concluding that the trial court erred by entering judgment in Mervyn's favor, the Court went on:

As discussed above, CDR lost standing as a plaintiff when the voters adopted Proposition 64, which amended the UCL law to limit private party lawsuits to those who have lost money or property as a result of alleged unfair competition. (Mervyn’s, supra, 39 Cal.4th at p. 227.) We therefore cannot remand the case with directions to enter judgment in CDR’s favor. However, CDR is entitled to an opportunity to amend its complaint to substitute a new plaintiff with standing. (Branick, supra, 39 Cal.4th at pp. 239, 242-243.) We therefore remand the case to the trial court so that CDR may file a motion for leave to amend its complaint. “On remand, should plaintiff[] in fact file a motion to amend, the superior court should decide the motion by applying the established rules governing leave to amend.” (Id. at p. 238, citing Code Civ. Proc., § 473.) If the court grants the motion, the court shall enter judgment in favor of the newly substituted plaintiff and determine the appropriate scope of injunctive relief. In fashioning injunctive relief, the court shall consider appropriate alternative means for making merchandise available to disabled individuals who are denied physical access to the merchandise.

Id. at 30-31.

New unpublished UCL "unlawful" prong decision: Cappa v. CrossTest, Inc.

The Court of Appeal's opinion in Cappa v. CrossTest, Inc. (First Appellate District, Division Four, nos. A113327, A114548) (Mar. 28, 2008) contains this discussion of the UCL:

Cappa alleged in the second cause of action for unfair business practices (Bus. & Prof. Code, § 17200 et seq.) that defendants had engaged in unfair and unlawful practices, including misclassifying Cappa and other employees as independent contractors; failing to pay wages to Cappa and other employees and provide them with wage statements; and misrepresenting the employment status of Cappa and other employees, thus reaping benefits and illegal profits at the expense of Cappa and his fellow employees. Cappa sought restitution of unpaid wages owed to him and his fellow employees, as well as disgorgement of profits defendants had enjoyed as a result of their unfair and unlawful practices.

Defendants acknowledge that this cause of action “depends entirely upon the viability of [the] first cause of action for wage violations.” As our Supreme Court has stated, “any business act or practice that violates the Labor Code through failure to pay wages is, by definition ([Bus. & Prof. Code, ]§ 17200), an unfair business practice.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178.) We have already concluded the trial court should not have granted nonsuit on Cappa’s cause of action for violation of wage laws.

CrossTest points out that this action is subject to Proposition 64, under which a private person has standing to sue only if he or she “has suffered injury in fact and has lost money or property as a result of such unfair competition.” (Bus. & Prof. Code, § 17204, as amended by Prop. 64; § 3, see also Bus. & Prof. Code, § 17203, as amended by Prop. 64, § 2; see also Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227; Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 802-803.) Here, Cappa has alleged that he suffered injury in fact and lost money in the form of unpaid wages. In the circumstances, we conclude the trial court erred in granting nonsuit on the cause of action for unfair business practices. [Footnote 10]

[Footnote 10] In reaching this conclusion on the question of whether nonsuit was appropriate on the cause of action for unfair business practices, we express no opinion as to whether Cappa complied with the procedural requirements for stating a claim on behalf of alleged employees other than himself. (Bus. & Prof. Code, §§ 17203, 17204; Code Civ. Proc, § 382.)

Slip op. at 11-12. It seems to me that on remand, and before re-trial, the plaintiff could seek leave to amend his complaint to add class allegations if he wanted to go the class action route (and assuming the liability evidence is common to the other employees, as it seems to be from the Court of Appeal's summary of it).